Tom was having a bad day. He was preparing for a presentation when he ran out of printer ink. His presentation was the next morning. He had to have those copies ready. He jumped in his car and headed out in search of ink. Driving around, he was unable to find a place open that had the ink he needed.

Tom was stressed out. He was between jobs. This was his opportunity to sell himself to a new team. If he didn’t have this presentation in hand in hours, he would be out of luck.

Or would he?

The Tom in this story is Tom Stemberg. It was Fourth of July weekend, 1985. He had been an executive at a supermarket chain and had an idea for a new type of food retailer. He had his business plan sketched out and was typing it up in preparation for a meeting with potential investors the following day. But he ran out of typewriter ribbon. He went in search of replacements, but all of the small office supply retailers he visited were closed for the holiday weekend.

Tom was frustrated by the experience, but it got him thinking. Instead of following through on his pitch for funding a new grocery, he started talking about creating an office supply superstore. The result was Staples.

Was Tom’s experience of not finding what he needed a case of bad luck? Good luck? Or was Staples destined to happen all along?

Luck v. Serendipity

The field of entrepreneurship used to place a lot of emphasis on luck and intuition. Come up with a new idea? You were in the right place at the right time. Make new markets happen? It was in your genes. Achieve entrepreneurial success? The stars aligned and you were destined for greatness.

But the research of Dr. Saras Sarasvathy of UVA Darden’s School of Business upended this traditional view. Effectuation shows that there is a process that successful entrepreneurs use to create new ventures. They don’t have a superior knowledge of the future. It’s not just a matter of fate. Instead, they work with what they have and what they experience in the present to create the future.

Luck is something that is brought about by chance, not by action. Serendipity is finding value in something unexpected. While similar, they differ in action. Luck removes the agent from acting. Instead, they are acted upon. With a serendipitous event, the impetus is on the agent to convert the unexpected experience they are having into something valuable.

Serendipity aligns with the Effectual Lemonade Principle. This says that expert entrepreneurs are open to the unexpected. They do not fear it, avoid it, or seek to eliminate it. Instead, they embrace it and beyond this, can be seen to create opportunities for the unexpected to thrive.

Embracing Serendipity

Nicholas Dew, Associate Professor at the Naval Postgraduate School, has written on the difference between luck and serendipity. He has identified three conditions that improve the likelihood that an entrepreneur will be able to take advantage of an unexpected event.

1 . Prior Knowledge. It pays to have a deep understanding of something. The specific field can be anything – as long as the individual develops competence. What’s important is the knowledge and confidence that emerges from this expertise.

2. Contingency. This is defined as an awareness of things that are occurring around the entrepreneur; happenings in the broader environment. In contrast to the previous point, this requires a broad view rather than a narrow but deep understanding. This perspective allows the entrepreneur to identify opportunities to translate their prior knowledge into creating new and innovative markets.

3. Searching. An openness to experimenting and trying new ideas and new combinations, this requires that the entrepreneur be on the lookout for things that appear to be unusual, unique, or innovative. This does not imply that the entrepreneur will “discover” or “find” a new market. But that they are open to trying new things in new ways as they work to create a new market.

Serendipity and Staples

How does our original Staples example show signs of serendipity rather than just luck?

1.Prior knowledge. Stemberg had a deep knowledge of how to run a major grocery store. He was a Harvard MBA with a strong business skill set and an understanding of how to build and market a retail store.

2.Contingency. Although Stemberg had a very specific need and was focused on finishing his business plan for groceries, he didn’t have such tunnel vision that he overlooked the opportunity before him. He was open to applying his prior knowledge in one area to a different field. He was able to identify the commonalities and differences from his experiences in food retail and translate that to an opportunity in office supplies.

3.Searching. When he couldn’t find the office supplies he needed in a pinch, he didn’t stop with defining this as just bad luck. He saw that it didn’t have to be this way - that there might be a solution that could solve more than just his situation. And that he could be the one to create this solution.

Being a successful entrepreneur isn’t a personality trait. And it’s not just good luck. It comes from following an Effectual process rooted in the notion that the future is not predetermined, but instead created by the collective actions of individuals.

With these three factors - prior knowledge, contingency, and searching - serving as inputs to understanding, entrepreneurs can be well positioned to change their luck into serendipity and their future into, well, whatever it is they want to create.

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Sources: What Effectuation is Not: Further Development of an Alternative to Rational Choice, Wiltbank & Sarasvathy (2010); and Serendipity in Entrepreneurship, Dew (2009).